With any hedge,
A)your losses on one side should about equal your gains on the other side.
B)you should try to make money on both sides of the transaction; that way you make money coming and going.
C)you should spend at least as much time working the hedge as working the underlying deal itself.
D)you should agree to anything your banker puts in front of your face.

Question

Quizplus · Accepted Answer

The purpose of a hedge is to mitigate risk, not necessarily to make a profit. By balancing losses on one side with gains on the other, the overall impact on your portfolio should be minimized. Option B is incorrect because if you make money on both sides, you may not need the hedge in the first place. Option C is also incorrect because you should not spend more time on the hedge than necessary. Option D is completely wrong - you should never agree to anything without fully understanding the terms and conditions.

With Any Hedge